The jobless rate is expected to stubbornly remain at five per cent for the foreseeable future, despite the Morrison government pledging an extra 1.25 million jobs over the next five years.
However, with Australia's jobs market reaching saturation point, the budget papers released on Tuesday show promising news on the wages front.
"As economic growth strengthens and spare capacity in the labour market continues to be reduced, wage growth is expected to pick up to 2.75 per cent through the year to the June quarter 2020 and 3.25 per cent through the year to the June quarter 2021," the budget papers show.
The projections are likely to be seen as ambitious, as wages growth was 2.3 per cent in the year to December.
All states and territories and most industries have recorded higher wages growth compared with a year ago.
Employment growth of 1.75 per cent is expected over the year to the June quarter 2020 and June quarter 2021, however this puts it below the 2.7 per cent growth for 2017/18 and 2.0 per cent forecast for 2018/19.
Treasury points to a relatively high participation rate and almost record-high employment-to-population ratio for those aged 15-64, and improving productivity, as being behind the tightening market.
"Strong employment growth has drawn people into the labour market who were not previously looking for work," the budget paper say.
Treasurer Josh Frydenberg said in his budget speech investing in skills, giving the jobless more personalised help and delivering economy-boosting projects such as road and rail would boost the workforce.
